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News & Commentary
June market review 16 Jul 10
It was another challenging month for sharemarkets around the world as the sovereign debt and financial sector issues in Europe continue. Sharemarkets and bond yields have fallen due to the increased uncertainty surrounding the world growth outlook. In Australia, it was a dramatic month in politics with the Labor Party replacing Kevin Rudd with Julia Gillard as prime minister.
Performance scorecard to 30 June 2010
|
|
Month |
Quarter |
Year |
|
Australian shares |
-2.6 |
-11.2 |
13.1 |
|
Australian real estate investment trusts |
-1.0 |
-1.5 |
20.3 |
|
International shares (AUD) |
-4.1 |
-4.8 |
5.2 |
|
International shares (hedged) |
-3.9 |
-10.9 |
14.1 |
|
Australian fixed interest |
1.4 |
3.6 |
7.9 |
|
International fixed interest (hedged) |
1.1 |
3.5 |
9.3 |
|
Cash |
0.4 |
1.1 |
3.9 |
|
AUD/USD |
0.7 |
-8.0 |
4.5 |
Financial year sharemarket performance could best be described as a story of two halves. While the year started off on a positive note with optimism returning to markets, rising sovereign debt concerns in Europe rattled markets over the second half of the year. Overall, the Australian sharemarket delivered a positive return with the S&P/ASX 300 Accumulation Index returning 13.1 per cent over the full financial year.
While the global economy has been expanding at around trend levels, growth levels are patchy with growth strong in Asia and more subdued in the more advanced economies. Chinese economic growth looks like it is moderating to more sustainable levels, while US growth has strengthened despite continued low employment levels.
The Australian Government’s proposed Resource Super Profits Tax caused additional volatility in the Australian sharemarket over the June quarter with investors concerned about the impact it would have on the thriving resources sector. Concerns proved to be short-lived when Julia Gillard negotiated a more palatable arrangement with the large mining companies in the form of a scaled down Mining Resources Rent Tax.
While Australian Real Estate Investment Trusts delivered negative performance over the month and quarter to 30 June, the sector outperformed the broader sharemarket.
The Reserve Bank of Australia left interest rates on hold at their June meeting with interest rates for borrowers now sitting at more average levels. Both international and local bond yields fell over the month as the risk of lower than expected world growth increased and investors flocked to safe-haven assets.
Looking forward while the global economy is expected to continue its recovery, growth is likely to be subdued in some areas. Financial risks in the global economy remain and investors remain cautious as they wait for optimism to return to markets.
